2019 financial year with outstanding result
Allreal reports record results for the year under review. Net profit including revaluation gains grew to CHF 234.8 million. Compared to the previous year, this corresponds to a considerable increase of CHF 73.8 million or 45.8 percent. The Board of Directors will propose a higher profit distribution of CHF 6.75 per share to the Annual General Meeting of Shareholders.
Net profit excluding revaluation gains amounted to CHF 134.6 million, representing an increase of 16.4 percent compared to the previous year’s amount of CHF 115.6 million. In addition to earnings reported by the Projects & Development division, excellent earnings reported by the Real Estate division contributed to the outstanding operating result.
For the 2020 financial year, Allreal expects to report operating net profit below the record level seen in the year under review owing to lower earnings resulting from the sales of development real estate in the Projects & Development division, but higher than in the 2018 financial year.
Based on the outstanding result and the stable business development expected in the long term, the Board of Directors will propose a higher profit distribution of CHF 6.75 per share, an increase of CHF 0.25, to the Annual General Meeting of shareholders scheduled for 24 April 2020. Profit distribution is composed of an ordinary dividend of CHF 3.50 per share plus a tax-free distribution of CHF 3.25 per share from capital reserves, which is tax-free to Swiss private investors. Compared to the closing price on 31 December 2019, the proposed pay out corresponds to an attractive cash yield of 3.5 percent.
Real Estate division convinces with strong performance
In the 2019 reporting period, the company acquired an ownership share in a residential property in Zurich Schwamendingen. While Allreal formerly owned 60 percent of the property, it is now the sole owner. In the second half of 2019, Allreal profitably divested a commercial property on Thurgauerstrasse 111 in Glattbrugg ZH. Together with portfolio additions carried out the previous year, which affected net income for the first time throughout the entire twelve-month period, rental income grew by CHF 9.6 million to CHF 204.4 million.
The cumulated vacancy rate changed only slightly. Compared to the previous year, it grew marginally by 0.2 percentage points to 2.2 percent. This value, which remains low compared to the market in general, confirms the high quality of the portfolio and is evidence of very good performance in facility and portfolio management.
As expected, direct expenses for yield-producing properties in the period under review grew to CHF 27.6 million, resulting in an expenditure rate of 13.5 percent. Net yield amounted to a high 4.3 percent.
The market continues to be characterised by strong yield compression. The overall value of the portfolio grew impressively by CHF 139.1 million based on the low vacancy rate and expected stable rental income in the following years.
The valuation carried out by an external real-estate valuer as well as changes in the portfolio resulted in a repeatedly higher market value of the entire portfolio amounting to CHF 4.38 billion.
Projects & Development clearly improves operating result
Earnings from Projects & Development division amounted to CHF 66.3 million. This increase is more than a quarter above that of the previous year. The reasons for the positive development are based on a stable gross margin in third-party business at a generally lower project volume and clearly higher profits from the sale of development real estate.
Compared to the previous year, the division’s operating result (EBIT) doubled to CHF 24.1 million.
In 2019, the Development department brought significant projects to implementation stage and transferred them to the Realisation department, such as Florenstrasse in Winterthur ZH or Alter Züriweg in Zufikon AG. The Development department designs projects for Allreal’s own portfolio and for third parties with a potential construction volume of several hundred million francs. Consequently, it made a significant contribution toward maintaining a stable workload for the Realisation department.
Project volume completed by the Realisation department in the period under review grew to CHF 340.7 million. Of this volume, third-party projects represent 79.2 percent and own projects 20.8 percent. It is Allreal’s intention to increase the share of own projects in the completed project volume in future.
Secured order backlog as at 31 December 2019 amounted to about CHF 820 million, corresponding to capacity utilization for more than 24 months. The order backlog was increased substantially in the second half of 2019 owing to the successful acquisition of several large projects which will be executed from next year. Allreal considers the project quality of the order backlog to be attractive.
Stable financial foundation
Financial liability in the year under review decreased by about CHF 71 million to CHF 2.00 billion.
In August 2019, the company issued a 0.4% bond issue of CHF 200 million maturing in 2029. Consequently, Allreal has placed a total of eight bond issues on the capital market which, on the cut-off date, corresponded to 57.7 percent of financial liability. The share of fixed-rate mortgages amounted to 29.8 percent and that of fixed advances to 12.5 percent.
Average interest rate for financial liability as at 31 December 2019 amounted to 1.33 percent compared to 1.48 percent the previous year. Average duration of the fixed-interest period grew to 56 months.
Group equity rose to CHF 2.37 billion, corresponding to a net asset value (NAV) per share of CHF 149.00. Equity ratio on the cut-off date amounted to 49.4 percent and net gearing to 83.2 percent. Thanks to its debt capacity of CHF 1.6 billion, the company continues to enjoy a high level of entrepreneurial freedom and space for financial manoeuvre.
Starting with the 2020 financial year, Allreal will change over from using IFRS reporting standards to applying Swiss GAAP FER. The company will, as a result, simplify its financial reporting while maintaining high transparency and significance.
The Allreal Group
Allreal combines a stable-income real estate portfolio with the activities of a general contractor (development and realisation). The value of the real estate portfolio amounts to CHF 4.38 billion. In fiscal 2019, the project volume effectively handled amounted to CHF 341 million. Allreal employs a staff of over 220 in Zurich, Basel and Berne. Allreal’s headquarters are located in Zurich and the company operates in Switzerland only. Allreal Holding AG is listed on the SIX Swiss Exchange.